Vanguard founder John Bogle was an outspoken advocate of passive investing. In 1976, under his leadership, the company introduced the industry's first index fund for individual investors. Vanguard has since become one of the world's largest asset managers, and has built a reputation for offering a wide selection of low-cost investment options.
The two Vanguard index funds that delivered the best returns in 2024 are listed below:
- Vanguard S&P 500 Growth ETF (VOOG 1.83%) advanced 35% last year.
- Vanguard Russell 1000 Growth ETF (VONG 1.60%) advanced 32% last year.
The two growth-focused funds above easily beat the 23% gain in the S&P 500 (^GSPC 1.26%) in 2024, and they could outperform the market again in 2025 as spending on artificial intelligence increases. Read on to learn more.
Vanguard S&P 500 Growth ETF: 35% return in 2024
The S&P 500 growth index measures the performance of S&P 500 companies that qualify as growth stocks based on their revenue, earnings, and momentum.
The Vanguard S&P Growth ETF tracks that index. It includes 234 stocks, and is most heavily weighted toward three market sectors: technology (49%), consumer discretionary (15%), and communications services (12%). The five largest holdings in the index fund are listed by weight below:
- Apple: 12.3%
- Nvidia: 11.6%
- Microsoft: 10.8%
- Amazon: 6.6%
- Alphabet: 6.2%
The Vanguard S&P 500 Growth ETF was a stellar investment over the last decade due to its heavy exposure to the technology sector, the best performing market sector during that period. The Vanguard fund returned 310% in the last 10 years, which is 15.1% annually. Comparatively, the broader S&P 500 returned 242%, which is 13.1% annually.
Grand View Research estimates that spending on artificial intelligence (AI) hardware, software, and services will increase at 36% annually through 2030. I think that catalyst will keep the technology sector ahead of the broader S&P 500, giving the Vanguard S&P 500 Growth ETF a good shot at market-beating returns in 2025 and beyond.
Importantly, this Vanguard ETF has an expense ratio of 0.1%, which means the annual fees will total $10 on every $10,000 invested in the fund. That is below the average expense ratio of 0.95% on similar funds, according to Vanguard.
Vanguard Russell 1000 Growth ETF: 32% return in 2024
The Russell 1000 growth index measures the performance of Russell 1000 companies that qualify as growth stocks based on their revenue and earnings. Importantly, while the S&P 500 and Russell 1000 track large-cap U.S. equities, the former includes the top 500 companies and the latter includes the top 1,000 companies.
The Vanguard Russell 1000 Growth ETF tracks 394 stocks, and is most heavily weighted toward two market sectors: technology (59%) and consumer discretionary (19%). The five largest holdings in the index fund are listed by weight below:
- Apple: 11.8%
- Nvidia: 11.1%
- Microsoft: 10.7%
- Amazon: 6.6%
- Alphabet: 6.2%
The Vanguard Russell 1000 Growth ETF performed better than the Vanguard S&P 500 Growth ETF in the last decade because it had even heavier exposure to the technology sector. Specifically, the index fund returned 367% during the last 10 years, compounding at 16.6% annually. That easily beats the 242% gain in the S&P 500. And I think that outperformance will continue as enterprises spend more on artificial intelligence in 2025 and beyond.
The Vanguard Russell 1000 Growth ETF has an expense ratio of 0.08%, meaning the annual fees will total $8 on every $10,000 invested in the fund. That makes it slightly cheaper than the Vanguard S&P 500 Growth ETF. That's why, if forced to choose between the two, I would pick this index fund.
